I’m a tax lawyer based in San Francisco (www.WoodLLP.com), but I handle tax matters everywhere. I enjoy untangling a tax mess from the past, disputing taxes with the government or planning taxes for the future. One of my specialties is advising about lawsuit payments. Whether you’re receiving or paying a legal settlement, you can probably improve your tax position. I write frequently about taxes, from expatriation to sales tax, from selling your company to restitution. I’ve written over 30 tax books, but my best seller is still Taxation of Damage Awards and Settlement Payments. Contact me at wood@WoodLLP.com.

Wesley Snipes Turns 50 In Prison But Didn't File False Tax Return

Wesley Snipes just celebrated his 50th birthday—in federal prison. The film star remains there over tax charges. See Actor’s depressing 50th birthday. You may think Snipes was mislead by advisers or just plain foolish to end up in jail over tax charges.

Maybe, but he’s not alone and it could have been much worse. After all, Snipes was convicted of failure to file, a misdemeanor. Filing falsely is a felony. You can be prosecuted for failure to file or for filing falsely.

You must file a tax return each year with the IRS if your income is over the requisite level. Snipes is over, way over. As Snipes’ misdemeanor convictions show, failing to file carries smaller penalties than filing fraudulently.

The U.S. taxes all income wherever you earn it. So forget arguing that only foreign-source income is taxable, making your domestic income exempt. There is a convoluted argument that foreign income is different, but don’t bother making it.

In fact, a variation of this bogus theory is the one that got Mr. Snipes in trouble, consigned to three years in prison. Stay away from other crazy arguments too.

Example: You file your original return April 15 and state you aren’t subject to income taxes because they are unconstitutional and you are not a slave to the federal government. You had better file an amended tax return properly reporting your income and paying your tax before the IRS contacts you to tell you they disagree with your original return. See Ten Tax Protestor Claims To Avoid.

Once you’ve filed your return, you can’t be prosecuted for failing to file an amended return, even though something may happen after you file that makes clear your original return contained mistakes. Yet if you knew the return was inaccurate when you filed it you should amend it to make it accurate without delay.

The IRS rarely brings up an originally filed return in audits or criminal prosecutions once the taxpayer comes forward and attempts to correct it by filing an amended return. But to take advantage of this rule you need to be proactive. You need to make the correction before the IRS finds your error.

According to E! Online, this federal prison camp houses roughly 290 white-collar inmates. Remember Snipes in “White Men Can’t Jump“? Perhaps in his new digs Snipes should start shooting a sequel: “White-Collar Men Can’t Jump.”

In his immensely successful screen life, Snipes normally cares about film release dates. But his next release date is more important: He’s scheduled for a July 19, 2013 release. That means less than a year to go.

Robert W. Wood practices law with Wood LLP, in San Francisco. The author of more than 30 books, including Taxation of Damage Awards & Settlement Payments (4th Ed. 2009 with 2012 Supplement, Tax Institute), he can be reached atWood@WoodLLP.com. This discussion is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional.

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As a more global comment, many people now believe that non-violent crimes such as tax crimes are dealt with far more severely than they should be. The comparisons to violent and sexual crimes are inevitable and stark. Some say it is a backlash to a time when white collar and financial crimes were barely punished. But that is decidedly not true today. And if you look at some specific examples, such as failure to file the foreign account statements called FBARs, many believe that the punishment is all out of proportion to the offense.

Find the time to watch the late Aaron Russo’s “America: From Freedom to Fascism” which is available free online. Pay particular attention to the scene where Mr. Russo asks an IRS Commissioner to show him the law that makes the Income Tax legal.

Not court decisions (the judges, after all, are on the same team as the IRS) but legislation. The Income Tax came into being with the Federal Reserve. Snipes should have filed a $0 return. It’s a Wizard-of-Oz smackdown scenario when a taxpayer dares to question the great and might Oz. The IRS is like the Soviet KGB.

yes watch Russo’s movie and also pay particular attention to the supreme court and congress rulings on income taxes also pay close attention to the IRS agents who actually resigned over the IRS activity and this fraud that has been going on! The commissioner who actually wrote the tax code being questioned is the nail in the coffin.

I find it amazing that someone would call the income tax unconstitutional at this time. Yes, at one time the Supreme Court did say that income tax on the income of real and personal property were the legal equivalent of a tax on the property involved and therefore, required apportionment.(according to my text book) So, we changed the Constitution. The 16th Amendment, which is very short, was ratified in 1913. I find it hard to believe that Wesley, or his accountant was unaware of this “little happening”. I just wonder “what was he thinking”! Well, I wish him a Happy Birthday anyway and pray his next birthday will be even better since his release date is before his next birthday!

Yes, the argument that the income tax is unconstitutional fails. I agree that it is hard to believe how much traction these arguments still get. However, the argument keeps coming back.

It was only in 2006 that the DC Circuit ruled (in the Murphy case) that taxes on an employee’s litigation recovery was unconstitutional. This ruling sent shock waves through the tax community. Then on rehearing, the same court reversed itself in 2007 and said the tax was constitutional after all.

Of course, the IRS puts any arguments about constitutionality in the tax protestor category. Taxpayers should be wary of any such arguments or of promoters touting these theories.

I can’t say I personally know how many states ratified the 16th Amendment to the Constitution. But I believe this argument has failed every time it has been advanced. I don’t think any defendant in a criminal tax case (or in a civil tax case for that matter) would be well advised to rely on this argument.

The amendment was not ratified and there is proof I think you should go back and look at some more books! The supreme Court States that in regards to the 16th amendment that the IRS has no new taxing powers. Common sense would then be that if it was unconstitutional before it’s unconstittutional now! if there is a law that says that you have to pay taxes then please site the law because I would like to see it please be aware though that the IRS doesn’t even site it when requested.